Favorable proceedings in Sino-U.S trade talks, EU’s attempts to help PM May on Brexit deal approval with fresh written clarification on Irish backstop agreement boosts investors risk appetite for third consecutive trading session.
Summary: Global markets is experiencing bullish price rally in both stock and forex markets today as Sino-U.S. trade talks which began earlier this week continues to influence positive price action across all major global economies. Two highly watched events of the week Brexit & Sino-U.S. trade talks are both seeing positive headlines and this has caused risk on trading activity to increase with each passing day. All major Asian and European indices are trading up by 1% while major global currencies are also trading positive since trading session began for the day. Sino-U.S. trade talks in China has extended into unexpected to third day however headlines in from U. S & President Trump’s tweet suggest that talks are moving in favorable direction despite several key issues remaining unresolved. Meanwhile effects of Fed Chair Jerome Powell’s speech last Friday where he signaled possibility of pause in rate hike plans for 2019 is fading from market.
XAU/USD: Increased risk appetite in market is hurting demand for safe haven assets in broad market. Gold has declined from six month highs it hit recently but has managed to retain bullish price action owing to subdued USD price action in broad market. Gold is expected to see limited losses even if risk on trading activity continued across the week owing to long term outlook which favors safe haven demand.
USD/JPY: Despite increased risk on trading environment US Greenback has failed to breach $110 price market for fifth consecutive trading session including today. Yesterday’s trading activity was subdued on mixed cues, however optimism surrounding Sino-U.S. trade talks gave the major bullish boost today in early Asian market hours. However ongoing political issues in Washington and partial shutdown in US government is continuing to limit Greenback’s recovery against Japanese Yen.
AUD/USD: Australian dollar is trading positive for sixth consecutive trading session today and hit new 3 week highs in late American-early Asian market hours at 0.7171 post which it saw slight decline owing to disappointing release of Aussie housing market data, however US-China trade optimism continues to support AUD bulls while broad based USD’s weakness owing to US political woes helped prevent downside. While investors look to FOMC meeting minutes update from later tonight for short term profit opportunities, risk on trading activity helped pair recover from intra-day lows and find strong support above 0.715 mark in European market hours.
On The Lookout: Investors continue to focus on key events – Sino-U.S trade talk related headlines as it concluded earlier today but officials said reports will be published later and Brexit deliberations on PM May’s deal in UK house of commons which begins today while government lost a vote on ability to control tax without parliament interference in case of no-deal Brexit scenario yesterday. Investors are also on lookout for latest FOMC meeting minutes scheduled to release later tonight and further updates relating to N.Korean leader Kim Jong Un’s visit to China. Latest reports state that N.Korean leader is in China for 4 days from Monday-Thursday on invitation of Chinese Premier Xi Jinping with intention to strengthen ties between two countries.
Trading Perspective: Risk appetite remains high ahead of event filled American market hours which is expected to keep both trading volume and market volatility relatively high.
EUR/USD: Optimism surrounding positive outcome from Sino-U.S. trade talks which concluded earlier today continues to underpin risk appetite in market which is expected to keep the pair trading positive across European market hours. But upside move possibility is limited owing to lack of fundamental support for EURO. USD remains subdued owing to political issues in US which limits downside move as investors focus on FOMC meeting minutes updates scheduled to release later today.
GBP/USD: GBPUSD pair lost most of its gain from early trading session today in late European market hours on comments from DUP member Sammy Wilson who said “proposals on Irish backstop are fairly meaningless” as parliament focuses on debate over vote of approval for PM May’s Brexit deal. However broad based weakness surrounding Greenback helped limit downside while investors await Fed meeting minutes update for short term trading opportunities.
USD/CAD: The pair hit fresh one month lows as Crude oil gained over 2% in broad market and price per barrel climbed above $50. Trader’s belief of possible pause in rate hike plans for 2019 by US Fed is limiting USD bulls from making a recovery as investors await Fed meeting minutes update from American market hours for short term trading opportunity. Optimism surrounding Sino-U.S. trade talks which concluded today is also supporting Loonie bulls on its positive price action today.
Bulls gains fundamental support amid declining crude oil price and concerns of global economic slowdown on subdued USD in broad market and hawkish Euro area macro data.
Trading Perspective: European equities and major forex pairs are expected to continue positive price action across London market hours as FOMC interest rate decision is scheduled to release at 1400HRS in New York time.
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